How to Invest in SIP? And its Importance

For equity investors looking to get a sizeable corpus, SIP investment is a great long-term strategy. It has been demonstrated that SIP investments yield higher returns than conventional assets like gold, fixed deposits, PPFs, etc.

Mutual fund SIP plans may be the best choice if you are a working professional with a long-term investment plan of at least five years and are willing to accept market-based risks. However, there is no hard-and-fast rule or a set time that can be used to determine whether to make mutual fund investments.

What is SIP?

When you choose a regular fixed plan for investing money, it’s called Systematic Investment Plan (SIP). Every month, a fixed amount is taken out of your funds and put into the SIP plans of your choice.

Way to Invest in SIP 

SIP Investment has become quite easy. You can do it online through different methods, which we will discuss below. However, investors must have their KYC completed and updated. 

1. You can invest in an AMC 

SIP investment can either be online or by going to the websites of Advisory Management Companies (AMC). You must create an account by giving all the details before proceeding. In the next step, you need to give all the bank details along with a cancelled cheque. In the end, the KYC is verified with the use of the Aadhaar card, and the money is sent to the appropriate mutual fund program.

You can make your offline investment by stopping by the AMC office in your area. You will need a completed application form, proof of identity documents, and a check or money order to cover the fee.

2. Platform Acting as an Intermediate

When using a third-party platform, investors can make SIP investments quickly and easily. This hub allows you to invest in, monitor, and take care of all of your mutual fund and SIP accounts across all of your advisory management companies (AMCs) with a single point of access.

• Register with a third-party platform that acts as an intermediary to participate in a systematic investment plan (SIP). 
• The next step is to decide on a scheme and a budget for the investment. Enter your personal information and bank information. 
• With the investment, they can send money online to withdraw their profits.

3. Get Assistance from a Broker

SIP investment through a broker, who is a mutual fund distributor, can be time-consuming and expensive. To invest in a SIP plan, you must submit your KYC documentation and a cancelled cheque. However, these days most brokers also have their investment-related website or mobile app. If the broker offers everything you need, setting up a systematic investment plan (SIP) is simple.

What is the best SIP Investment in Mutual Fund?

There is no such thing as picking the top mutual fund. This is because a mutual fund’s current performance is no indicator of how the fund will do in the future. Similar to how the fund with the worst performance now can turn out to be the best performer tomorrow.

Most casual investors research a fund’s performance over the prior three to five years before committing. However, there are undoubtedly additional aspects to think about. Here are some things to consider when choosing a mutual fund for a systematic investment plan. 

• Investment goals consist of things like saving for college, saving for retirement, etc.
• Investment horizon refers to the duration during which a monetary investment is expected to generate an It could be one year, three years, or even ten. 
• The investor can select either a debt or an equity fund, depending on the duration of their investment.
• the degree of uncertainty that an investor is willing to take
• Investors can choose the most appropriate mutual fund for SIP investment based on these characteristics. 

Investors also need to think about the following issues when choosing a mutual fund:

• Comparison of Fund Results to a Benchmark
• Stability in the fund’s returns
• Evaluating a mutual fund’s results with other funds
• The expertise of the Fund Manager
• AMC’s Past results 
• Mutual fund total assets under survey
• Comparing costs and benefits

Benefits of SIP Investments:

The benefits of SIP investment are as follows:

1. Easy customization options

SIP allows you to contribute as little as Rs 500 per month and enjoy the compounding effect of your investment over time. A SIP not only helps you save money but is also easy to monitor and manage.

2. Rupee Cost Averaging

The distinctive aspect of SIP is the Rupee Cost Averaging, whereby investors can buy more units when the market is low and fewer units when the market is high. Because of the nature of SIP plans, your investment cost will go down, and your profit potential will go up as you buy more whenever the market drops.

3. No withdrawal commitment 

 With SIP, you won’t have to commit to something as long-term as a PPF or ULIP. There is no set term for withdrawal, as these are open-ended funds. You are free to take as much or as little as you want out of your investment at any time without penalty. 

4. Rate of Interest compounded 

Compound interest is the power behind SIP, which works because your initial investment will earn interest on top of interest. As a result, it’s more profitable to invest a modest sum regularly over a long time than to make a large lump-sum expenditure.

Conclusion

Investing in a SIP plan is a great first step. Mutual fund SIPs are a good way for new investors to start. When first starting in the investment world, it’s important to consider the big picture. Investment in long-term aims is another consideration. You should invest your money for a longer period. In this way, you are more likely to achieve your goals easily.

In addition, you can try out different methods to increase your mark in the stock market. A long time horizon for an investment means that it has the potential to provide high profits. For more details, visit the Piramal Finance website and get assured assistance.